Rio Tinto will expand its iron ore operations in the Pilbara with a $3 billion dollar investment set to create more than 2000 jobs in the region.
The miner announced a massive $3.1 billion expansion to its Pilbara iron ore operations early last year with the majority of the investment used to extend the life of its Nammuldi iron ore mine, with the site receiving a $2 billion boost.
A further $1.1 billion will be used on early works to expand the company's Cape Lambert port and rail facilities including the construction of a 130MW power station at the company's Cape Lambert port and rail facilities.
Rio Tinto want to increase iron ore production in the Pilbara to 360 million tonnes per annum by 2015.
Premier and state development minister Colin Barnett said the West Australian economy was set to benefit from the investment.
“This major investment by Rio Tinto will create almost 1 500 construction jobs and secure ongoing employment for more than 700 people,” Barnett said.
“The Nammuldi mine, 60km north-west of Tom Price, includes a major investment in mine infrastructure, which will see iron ore mined below the water table and increase the mine’s production limit from eight to 23 million tonnes a year.
“At Cape Lambert, Rio Tinto will build a state-of-the-art, fuel efficient 130MW power station to feed into Rio Tinto’s integrated power network. This additional power source will help meet the port’s power needs as annual capacity grows from 85 million tonnes to 235 million tonnes by 2015,” he added.
The construction of a 1.8 kilometre jetty and a new four-berth wharf to run parallel to the existing wharf will increase the ports capacity by over 100 million tonnes.
In announcing the expansion last year, Rio Tinto Australia chief executive Sam Walsh predicted iron ore demand from Asia was "forecast to grow strongly".
He said the investments at Cape Lambert and Nammuldi were a "significant milestone" in the company's plans to increase its WA iron ore operations by 50 per cent.
Rio said the Nammuldi expansion was expected to deliver first ore in the third quarter of 2014 and increase the mine's life by 14 years.
The company also posted a full year production result of 253 millions tonnes, (mt) beating its own guidance of 250mt by 1.2 per cent and topped last year's 245mt by four per cent.
Iron ore prices have strengthened in the last four months, with analysts predicting the mining sector would benefit from a renewed investment.
The spot price fell to lows of around $90 in the second half of 2012, but the market has taken back almost all of the lost ground and the price currently sits at almost $155 a tonne.
However, the news has not been all good for the major miner after the company announced an aggressive cost cutting regime, after posting its first ever full year loss of almost $3 billion in losses.
Rio reported $9.3 billion in underlying earnings; a $5.3 billion drop in comparison to 2011 results.
CEO Sam Walsh said that while the company would be forced undertake drastic cost-cutting measures, investments in projects which would create good return for shareholders was critical.
"We must get the balance right between risk and reward in assessing new investments," Walsh explained.
"We rigorously evaluate these opportunities against all competing uses for cash, including returning it to shareholders.
"Let me assure you I will not be pursuing growth for growth's sake."
Ernst & Young global mining and metals leader Mike Elliott said while costs remained an issue for Australian miners, the sector would see a renewal in investment as commodity prices rebounded.
Elliott said the decision by Fortescue Metals Group to restart work on its Kings deposit, sidelined last year after the fall in commodity prices, was also expected to rebuild confidence in the sector.
“There is still a very good pipeline and we are confident that modest price signals will emerge over the next six to 12 months, resulting in some new project commitments in the second half of 2013,” he said.
“I think, unlike before, it’s likely to be more of a gradual rise in the number of projects being committed to.
“But the fundamental demand story for mining and metals remains strong and we are already seeing an increase in growth in the Chinese economy, with expectations that this will be maintained in 2013.”
However, while investment by companies with deep cash reserves like Rio opens the way for expansion, others are finding that financing projects in the region is mostly dependent on final government approvals.
Aquila Resources has had to move spending on its fledgling Pilbara iron ore project to “minimum” levels due to a dispute over its budget with joint venture partner AMCI.
In a statement Aquila said because the two parties could not agree on a budget for the rest of the 2012/13 financial year, spending on its West Pilbara Iron Ore project would be curtailed.
The dispute has been an ongoing issue for Aquila, and was referred to arbitration in September 2012.
The announcement follows the WA Government's decision to give Aquila the green light to develop Anketell Port, a key part of its $6 billion iron ore project.
The environmental approval marked a huge boost for the miner, which has long struggled for the rights to develop the port to its specifications.
To gain final support the Federal Government must now approve the development, which aims to export 350 million tonnes of iron ore per annum.
This approval for the development is crucial to Aquila securing the bulk of the $3 billion funding it needs to fuel its ambitious project.